Tag Archives: market responsiveness index

Creating a new business that endures over a long time is hard. We all know the statistics; 80 % of companies fail within the first 2-3 years.

What separates the businesses that sustain from those that wither away? Customer obsession. These companies have found a problem worth solving, a need that must be filled, and customers willing to pay. It all sounds simple.

What happens when these businesses grow up?

Over time their success breeds complacency. They no longer have to fight to win every customer; customers come to them; life is good. Leaders become managers and get paid to manage things already in place. The focus becomes the numbers, and the tail begins to wag the dog.

In markets where growth is turbocharged, mistakes are brushed under the rug. “So we stuffed up for that customer. There will be another one to replace them….”

It all goes well until the music stops; the tide goes out, and companies are exposed. Suddenly new products or services start failing not because they are bad products or services but because customers have lost trust. Managers have not been paying attention to the real source of revenue and profits – loyal customers.

Things have changed, growth has stalled, reputations decline, and customers are walking away.

Time for some customer-centricity.

The time has come to take a hard look at the business, how we are operating, what needs to change. We need to shift to a more customer-centric way of doing business!

Where do we start? How do we make it happen?

Like any and every major accomplishment in human history, everything great begins with one step forward.

In this case, that step is to take a realistic view of exactly how customer-centric you are as a business. For many that small step maybe a step too far: they don’t want to know.

Feedback hurts – it can feel like a knife twisting, gauging a hole in our being. It instills fear, even panic in us. And yet it is the truth, the way we perceive things is the way they are no matter what stories we want to tell ourselves.

So why do leaders say they want their businesses to be customer-centric but are not willing to take the first step?

A product-centric organization is one that is focused on the products it brings to market rather than the customers that buy those products.

It looks to develop new products by leveraging technology or specialized skills that exist in the company. It starts by looking internally at its capabilities rather than externally at what needs are not being met.

The chart below is a simple comparison of the two approaches:

In large complex organizations, a product focus provides management with a direct line of sight into which products are selling well, at what profit and clear product owner accountability. While it does simplify the management of a firm it does come at a cost. It tends to create siloed organizations that compete for customers and often lacks a coordinated approach. In fact, many of the poor customer experiences happen as a result of this internal/product focus. The other downside is a myopic vision of the market that blindsides companies to key changes.

What business are you in?

Product-focused companies define themselves by their products. For example, Kodak originally defined its self as being in the photo processing business. This definition impacts the culture of the company in a way that hamstrings thinking and creates impediments to action. When the shift to digital came Kodak resisted this because of the impact on its “products – photo processing”.

The classic example of this is the “Last buggy whip company” the company that made the best buggy whips in America! It just failed to see the car was coming to obliterate its market.

The future for companies is to balance this product focus with a customer focus so that customers feed directly into decision making and are not an afterthought.

What trends are affecting the way your customers solve their problems?

We are all customers and we know what a great customer experiences feels like. We also know that a great customer experience influences our behavior, we want to talk about it with friends and we feel good about doing business with the company that provided it.

We know all this and yet we see time and again examples of poor experiences, just like this Range Rover customer above taking revenge on the company that clearly did not create the right car ownership experience. Why does this happen?

In our work with clients we have found a number of key reasons:

1. Culture – culture drives everything in an organization. It creates the expectations for how employees behave. It can be left to chance or actively managed. The culture develops not from what people say is important and valued but by what is visibly shown to be important through the way people behave.

For example many companies say that customers are important but then will make decisions that will directly disadvantage the customer in the interests of the business. Bank fee increases, hidden charges, confusing pricing models are great examples of companies trying increase profits without providing customers with any more value.

This is usually the result of short term profit pressures. The message: customers are important until we need to make our numbers – then all bets are off!

2. Goaling – what’s measured gets done. The metrics a business uses will drive behavior, if none of those metrics include measures that are important to customers, people will not focus on the impact they are having on customers.

3. Hiring – hire people that buy into the company’s mission and actually want to add value and contribute to delivering on it. Specifically put hiring practices in place that filter out those that can’t connect their work with customers. Test potential employee’s mindsets, do they have customer friendly skills like the ability to listen, accept feedback, empathize with other people’s positions.

4. Silos – silos can be great, they drive efficiency and specialize expertise but when they become too competitive and an “us and them” mentally develops collaboration is crushed and customers will suffer.

So what do companies with strong customer experiences do right?

Improving the customer experience is about changing a company’s culture.

Companies that can achieve a customer culture take improving the customer experience as seriously as improving financial outcomes.

Our studies of organizations around the globe that have built strong customer cultures have revealed some major themes:

Strong and visible leadership

Leaders are not only committed to the customer experience but also able to instill that commitment in the rest of the organization. There are usually two primary leaders involved in the process – a CEO or business unit leader who sets the vision and a head of strategy or customer experience who helps execute the strategy. In addition a guiding coalition or customer engagement council that brings in representatives of the broader leadership team it established to oversee progress.

These leaders commit to changing the way they do things in a way that sends the right message to the organization – that customers are important.

A clear mission, vision, and values

A clear purpose beyond “profitable growth”, one that actually does inspire and connect with people emotionally and is contextualized in a customer frame is crucial. This should drive a clear set of behavior standards that capture the intent of the organization and create accountability for customer service and the customer experience among staff members. Amazon’s mantra is “save customers money” and it drives everything (more on this here)

These are not just words on a page. Rather, companies must reinforce these beliefs and behaviors at employee inductions, coffee talks and the regular team meetings. Companies should use real customer examples to ensure that the mission, vision, and standards resonate throughout the organization.

Customer Immersion

In larger organizations people get disconnected from customers, they lose site of the value being created and what its actually like to be a customer. A process of regular customer immersion sessions helps executives and employees regain that connection. This may include call center sessions, customer visits, bringing customers into internal planning sessions and so on.

Consistent Communication

All messages should incorporate customer focused elements so that managers and staff see the customer experience as a strategic objective that is as important as other financial outcomes. It’s essential that companies consistently communicate what constitutes the right customer experience not only in the strategic plan but also in job descriptions and performance evaluations.

Buy-in from all staff

Defining the reasons for the change and the personal value of being involved in a customer culture change initiative is crucially important. All staff need to understand the reason for the shift in focus and how it will benefit both customers and the business. Staff then ultimately need to see it is in their own self interest to change the way they go about their work.

A way to measure culture change

External and internal measures can be used to assess whether a company is actually changing, the image below shows the relationship between the internal measure of “Customer Culture” relates to the external measure of customer satisfaction and ultimately profit growth.

A customer culture can be measured using the Market Responsiveness Index which allows companies to see the progress they are making against a benchmark of companies around the world.

A message to leaders

Improving the customer experience is about changing a company’s culture. This change is the most powerful, legacy-defining step a leader can take to improve the performance of a business and the engagement of employees. Senior executives must not only take responsibility to make the customer experience a priority but also must allocate the necessary time and resources to make it a reality.

While there is work involved, it does not necessarily need to be expensive and the payoffs are enormous. Show me any massively successful company in almost any industry and 8 out of 10 times they have a strong foundation based on a customer culture.